Support for COBRA Subsidy Wanes in Congress

 Broad congressional support has nearly vanished for the once politically popular COBRA program subsidy for involuntarily terminated employees.  It was part of the 2009 stimulus package and expanded and renewed several times since its inception.  The last renewal expired on May 31, so employees laid off since then are no longer eligible for the subsidy which paid 65% of the COBRA premium for millions of unemployed workers.

Mounting concerns about the soaring federal budget deficit make it highly unlikely that another extension will be approved.  The Congressional Budget Office recently revised its estimate for the federal budget deficit for fiscal 2011.  Original projections set the number at $980 billion, but that number has risen to $1.07 trillion.  So even though unemployment is still high, the national budget is getting worse.  Congressional budget analysts estimate the cost of the COBRA subsidy law to be around $25 billion.

Although the cost to the federal budget has been high, the subsidy successfully made COBRA coverage more affordable for a large number of laid-off employees.  Participants in the COBRA program during the subsidy period was roughly double those who enrolled in it five months prior to the creation of the subsidy.

With the apparent end of the subsidy, COBRA enrollment rates are falling.  Workers either can’t or aren’t willing to pay the high premiums to keep their medical insurance. 

Employers had to deal with additional administrative hassles, especially in the beginning when there was little guidance to determine eligibility.  In addition, health care premiums may be affected as well, with higher-risk workers taking advantage of the subsidy when it was available.

From Business Insurance, August 23, 2010 issue, pp. 1 and 25. Also from www.businessinsurance.com, August 19, 2010 post.